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tv   Fast Money Halftime Report  CNBC  October 15, 2012 12:00pm-1:00pm EDT

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because i'm so worried that i'm going to be the last one at the party and i think there's a general sentiment out there, play the qe rally, but know that it's going to have a day where it's going to end, and there's a lot of fear as a result of it. >> we've already lost a lot of our gains from when it was first announced. always good having you here. thanks, gary. let's get back to headquarters. wapner and the "fast money" halftime. thanks very much. welcome to halftime. four hours to go until the close. reversing last week's losses. that's what we're doing today. dow is good for about 60 points. the s&p and the nasdaq higher today as well. here is what we're following on halftime. banking on the financials. citi beats, goldmans on deck. which shock should you be betting on. cliff-hanger, how will the fiscal cliff hang out? will congress strike a deal. value shopping, the dow and s&p only a few percentage points
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from all-time highs. what stocks are still cheap and which ones are priced for perfection? we're getting the traders' best ideas to help you make money right now. we are trading all of the big movers today with joe terranova, josh brown, mike fur mi, and stephanie link. let's get right to it. barron's putting out a bullish market issue but we're looking for deals. only six stocks in the dow have pe ratios below 10. hewlett-packard, jpmorgan, caterpillar, chevron, cisco, and microsoft. josh brown, what's the best buy right now? >> i love chevron. we've been buyers since it broke 100 to the upside. here is a stock that's about half the size of exxonmobil, has similar growth profile, and a higher dividend. can't see why anyone wouldn't make cvx part of their portfolio. >> even though they were a little cautious last week. >> but this is the type of stock you buy on cautious quarterly guidance because it is not a quarterly growth stock type of
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story. i would make a sim lash case with fed ex, nike, disney. these are the types of companies that give cautious guidance. these are your chances to buy them on dips of 4% and 5%. you don't run from these stocks on one quarter's data. >> joe, go shopping. >> and that's exactly where i went is to chevron and i did so last week on the pull back. talked about it, moved some money out of the refiners into these mega cap energy names. got chevron on the sell-off. i agree with everything josh is i saing. that's your moment of opportunity. it's a great way to play energy in a defensive nature and not have to worry about what the price of crude oil is doing at the time. you're allocated to energy up or down. it's going to work in the environment. >> mike murphy, who do you like? hewlett-packa hewlett-packard, jpmorgan, value, value traps? >> some of them are cheap and probably getting cheaper like a hewlett-packard, like a microsoft i think even. i think the valuations there just -- they're way too expensive still. caterpillar is something -- chevron is a great name
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obviously, but caterpillar is something i think you look, there will be a recovery in the mining business, and i think that's shaping up for a huge 2013 in caterpillar. down around $80, $81, $82 a share where it's trading right now. i think you get a lot of bang for your buck and all you're betting on is there is at some point a recovery in the global mining picture. i think that's pretty easy. >> what about a recovery or pickup in the chinese economy? doesn't a lot of it come down to that? >> exactly. and i think if we are having a hard landing, scott, i think it's behind us. even the worst expectations for china, 7%, 7.5%, 8% growth, i think e sort of upside surprise, you hit the nail on the head. upside surprise out of china, caterpillar starts to take out $90 quickly. >> stephanie? >> jpmorgan, i thought the reaction on friday was ridiculo ridiculous. that quarter was very good. they beat earnings, beat revenues. mortgagings were very strong. you will see that as a common theme in the banks and we have
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already, and i think capital markets continue to recover. so this stock has not recovered actually from the -- the stock prices have gone up but the valuation at 1.1 times tangible book. the stock typically trades at a lot higher multiple than that. that is one we will be buying when our restrictions are cleared. >> an interesting difference of opinion between jpmorgan's view on housing and perhaps what you got today out of citi, right? >> i think it depends on which side you're on. are you looking at originations, looking at production, looking at servicing costs? i think that jpmorgan has very good exposure to housing, so does wells fargo which i thought that reaction shall and it's down again today, let that stock settle out. the problem with wells is it's not as cheap on a tangible back basis and so that's why you have to let that one settle out, but i think the common theme is housing is improving and that's why we want to be owning these. >> joe, jpm, eight times
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earnings. >> i love jpm. on this list of six no one is suggesting you go out with hewlett-packard and pick the bottom. >> which is the quote, unquote, cheapest. >> five of these six companies, they could have a cyclical tail wind which would want to get you into the stock on a long-term basis. the problem and what ails hewlett-packard is secular, and a lot of folks in the wake of the announcement a couple weeks ago said you want to buy this stock, big money is moving into the stock, absolutely not. you don't touch it. this is secular -- >> i think that highlights the danger in drawing any conclusions from a single data point like pe ratio. it's clearly a cornerstone of valuation but not a buy or sell decision based on that one moment alone. there's context. the context behind cisco is the fact they can't stop issuing new stock options. the context behind microsoft is
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the same thing. it's important to understand pe and understand it's not a buy and sell decision. >> that's why i throw out is it cheap for a reason? which stocks should you consider rotating out? >> i have been talking to some of my really smart people i talk to. there are people who never come on air, and what i'm about to say in terms of people might be rotating out of as they rotate away from where they've been hiding with the consumer into perhaps, oh, my gosh, joe, china, something like that, the first one i'm going to mention, stephanie link, i'm going to want you to channel your best jim cramer when you hear this, and that's going to be sherwin-williams. if you look at some of these names -- >> a tremendous run. >> almost all the names i'm going to mention are great runs relative to the market. remarkable relative to the market because people have been hiding in them. sherwin-williams, ross stores, home depot. fabulous companies we're talking about. look at gap stores.
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look how well it's done. look at disney. here is one that hasn't performed as well relative to the market but still could be considered expensive based on the price of earnings multiple and other issues people consider like cash flow concerns and that would be verizon. just a name to keep an eye on. again, if people want to move out, this is all a 60 to 90-day rotation out of into something else -- >> which is interesting. you take each one of these individually, right? let's take -- ross stores was on your list. >> ross store is on the list. >> up 30% year-to-date. they raised their guidance last week. so the fundamentals match the move. >> but let's look at dollar tree. if you look at what happened there last week when the stock fell off a cliff, it shows you what could happen if there is not -- everything doesn't go quite right or as people -- >> anything can happen. with could all not wake up tomorrow. >> herb, herb -- >> hi, steph. >> hi. so i'm not going to go on
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sherwin-williams. i want to talk about ross stores in the low 60s it's very interesting. you have margin expansion opportunities, you have square footage growth, and there is one thing that was so clear to me in the last several monts in terms of retail sales is that consumers are still looking for a bargain, and these -- ross stores and tjx have it and ross stores trading at 16 times earnings, historically traded 18 times. it's come down a little bit -- >> steph -- >> what? >> none of this is calling out ross stores or tjx. the question is what happens if people swing away from the consumer stocks? won't a company like ross stores, isn't it a sitting duck to get hit here? >> no. i'll tell yu. you have people allocating a certain amount of dollars or percentage of their portfolio professionally to a given sector, and what they're the most adverse to parting with are the strongest names in that group. actually we get a correction, what you want to do is look at the names that hold with the best. those are the names where the people are most unwilling to
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sell. they will say i have to lighten up, i'm getting redemptions or i want to raise cash, but i love my ross stores. i can't part with it and that is actually a really strong signal for a continuing rally. it is not the kind of thing where you see, hey, let's blow this thing out just because it's been acting well. >> not to go everyone against you here, but what you're really talking about is a shift in the fundamental story globally. you're talking about services not working anymore and goods beginning to work which is not happening. manufacturing remains week. global gd p growth is not accelerating, it is decelerating. so agreeing with what josh is talking about here, take a flame lick disney, i know you're not going after disney -- >> at a historic high. >> historic high but has pulled back recently, and i think a lot of the reason for the pull back is last earnings there was a sappointment regarding buy backs. now if the stock pulls back and it gets to that 48, 49 area,
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you're going to go back. there's going to be a tremendous amount of money managers that want to go back into disney for that buy back, for that zwroosh gu -- >> guys who missed it. >> you have some extremes going on here -- >> pete najarian pointed out all they're going to do with home depot is going into lowe's. they're not going to go -- >> people will pay up for secular growth because there's a lack of cyclical growth in the economy, so names that have like sherwin-williams, home depot, they have their own growth story and it's not happening elsewhere, so you will see managers pay 14 when last year they would have only paid 13. >> i'll agree with that. i'm going to go on herb's side on a couple names. something like the gap, if the gap starts to roll over, any hint of negative news or any hint of slower consumer spending -- >> but you're not getting that. retail sales better than expected today. >> i'm saying if. gap would be something people would roll out of quickly.
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sherwin-williams trading at 19 times earnings, i think that's the big difference. gap has doubled. i think one slip up to cause them to get hit. sherwin-williams is still on a historical basis fundamentally cheap. some of these names i think people would look to rotate out of quickly. others like a home depot and sherwin-williams are there for the long haul. i'm going to pin you down. which one would you get out of? do you have something on your -- i asked you what are you going to shop for? what are you going to return? >> i would get out of the gap. i think the gap has come too far, too fast. i have been negative on the company for a long time this year. i wouldn't be short the name just because the strength in the sector, but if there is any slip up, i think a lot of people would look to sell the gap because they have a ten-year history of disappointing investors. >> stephanie link, you're going tock ba to the store with a bag full of what? >> i'm going -- i'm sorry -- >> you're going to return something. which one are you selling? >> i do think that verizon could continue to see weakness and that's because of the threat
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from the sprint -- this new sprint deal, but actually that's one that if it were to fall to 40 or below, i like it just based on yield. but from a fundamental point of view i can see why that stock would be -- why people would use the source of funds for that one in the short term. >> josh? >> out of this group? i think i'd probably walk away from something that's not a retailer because actually the consumer is telling you right now they're willing to spend. so one of the other names -- >> what about verizon? you play it off the softbank/sprint deal. >> why do you own verizon? if you talk to nine out of ten individual shoeders in it, they're not expecting growth or a continued expansion of the multiple. they want that big fat dividend and they're getting it. it's a bond-like equity. to tell is because it's more expensive i think is only capturing one part of the story. >> you're assuming -- you say sell it like the individuals are going to do. remember the etfs own this thing. you're talking about a market
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that isn't going to trade the way it used to. let's remember how these stocks trade. you guys talk off air about this all the time. it's not necessarily some money manager saying i'm not going to get rid of my verizon. he may hang onto his verizon but what the basket do when the big rotation occurs, the algorithms kick in and the rest will be histo history. >> in the case of a verizon or disney you're talking about liquid stock. >> these are elemental. they don't get kicked out very easily. they're in every index. >> we make that the last word. herb, thanks so much. on the way, how to trade the world's biggest financial firms and why crude may not be your best trade in the energy sector. some fresh picks there. later, why you may get -- what why you may soon get a lot more bang for the buck in europe. we'll be right back. y you may soon get a lot more bang for the buck in europe. we'll be right back.
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welcome back. citigroup leading the financial sector after topping street expectations. tomorrow it's goldman's turn. with the financial sector up more than 20% this year, which stock should you own right now. let's welcome anton schutz, president of a fund that invests exclusively in the financial sector. good to see you. >> always a pleasure. >> great citigroup for us. >> it really was. it was nice to sigh with all the noise and the moving parts people really looked through to the numbers and the numbers were solid all across the board. one of the few banks that had growth in deposits, growth in loans, maintained it's interest margin much stronger than everybody else did. a real nice quarter out of citi. it was nice to see. >> it's one of your top picks, yeah? >> it is. it's a top holding, a top pick. the interesting thing is it trades for a fraction of its tangible book value, up over $52 a share. a stock in the mid-30s thats had
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incredible global reach. i think it will be able to maintain its margin where a lot of banks will struggle to do that. >> look ahead to goldman sachs tomorrow. capital markets improving and you do have less expo sure to housing which i guess could be somewhat of a positive. >> you also have no exposure to the libor issue. i think that's another sort of nice thing that can't happen to goldman or morgan stanley. i think you're going to see really nice numbers out of goldman. i think the real question is return in equity is still lower than prebubble. i think these companies are starting to look at how they compensate people and comp will continue to be a pressure point. they will pay their employees a little less as a percentage of revenues to drive home a little more return. >> it's josh brown. i know that the big difference between you and a lot of the bank analysts is you will actually pick shorts or idea you very much don't like. i'm curious, are there areas
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away from citi and goldman that you would be avoiding if you were investing in the financials right now? >> sure. i mean, i think there's some regional banks that have gotten a little too much air underneath them, and, you know, traded midteens multiples. >> like which ones for example? >> you know, unfortunately, i never talk about short sales. management will never talk to me again. it's important to what i do. if you do a screen -- >> can you give us an idea -- i'm sorry to interrupt you. if you can't talk about that and certainly we respect that, you've obviously had a good year. you know, you have beaten the market. you do have great exposure to the financial sector. can you give us the kind of financial institution that you would question at this point if you won't just outright name a short? i mean i don't see jpmorgan on your list. can i read between the lines and say you'd have concern about a bank like that? >> you know what? yot own jpmorgan right now so that's a correct observation. i i am not short it, i will say
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that. my question on jpmorgan is this. everybody loves it, so what do they do for an encore? and the other question on jpmorgan is they are a libor bank, so since everybody loves it, could something come out of the woodwork that would surprise people. the kind of names i'm short are companies with huge securities portfolios that are reprising right now so their margins are going to get killed and they trade at midteen multiples. if you do your homework you can find these banks with exposures. there's going to be disappointment in their earnings. >> joe, quickly. >> let's go back for one second to goldman sachs. there has been over the last couple years a lot of longer term money managers that have kind of moved away from goldman on the concerns of whether you want to call it reputation risks risks, sec. do you think reputational malaise surrounding olding
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goldman sachs in a core holding has been removed and it's back in the investment banking side the name you have to own? >> i think you're making an important point here. i think reputation risk, they've been through it all. they have been hit by a lot of stuff. they have survived. they're capturing market share because with all the turmoil going on in europe, there's a chance for the american banks to really capture market share. so i think, you know, the fundamentals appear to be improving. obviously with all the quantitative easing going on around the world, risk assets are something people want to come back to. a goldman is a type of place that people really want to put risk on and get a good name with exposure to all other asset classes that are moving up. you have got a good shot with goldman. i think you're right, reputation has survived, they're grabbing market share and the risk-on trade appears to be strong because everybody in the world is printing money. >> stephanie, we have to run, i'll ask you to be brief but do you want to hit back on jpmorgan? >> i would say there were a lot of down grades when the london whale came out and you had
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analysts run for cover. in my opinion, i i don't think it's loved. >> fixed, income, currency and commodities. >> it was up 35%. i'm curious about your thoughts. >> i think it's a combination of both. activity is strong. citi has itself righted in that unit, so i think, you know, the defections that you've seen have slowed, and i think there's been a lot of activity. i think jpmorgan actually was distracted last quarter still dealing with the whale issues and head count issues. i think you will see good numbers in goldman and good numbers in morgan stanley and hopefully bank of america. i think jpmorgan may not be the best in fic. >> thanks so much. >> always a plesh pleasure.
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>> goldman has surprised big time three quarters in a row. i think you want to be in it. >> in it ahead of the numbers rather than after. >> if you like the group, this is the one. >> absolutely. goldman is recovering from the 2011 sell-off. i think it's reclaiming best in breed status. if it gets technically above 128, 130, i think you're going to see a lot of follow through buying. >> still to come, the odds of resolving the fiscal cliff. speaking of goldman, it's taking a position not shared by the majority of investors. first, what's on the line for the major cell phone carriers after a japanese company agrees to take a major stake in sprint. and why your best energy trade may not be oil. we'll be right back.
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welcome back. let's do it. our top three trades. softbank striking that deal with sprint to buy up to 70% of the for just more than $20 million. look at the list. here is sprint giving back three quarters of a percent. >> real interesting deal here, scott, because you heard the
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rumors and this deal has been talked about for so long and you kept hearing 70%. >> forget the rumors, you heard david faber report the news been the companies did. >> great job by david. a lot of people were valuing this stock over $7. sprint is actually trading lower. the company is going to sell stock at $5 -- a portion of the deal is being done at $5.25. it's not all being done at $7.30. the stock is not having the huge rally people were looking for. >> an unconfirmed report amazon is in advance talks to buy the mobile chip business of texas instruments. does that make sense? >> it makes perfect sense. for am zob it's a win because their big competitors apple and samsung already control their supply chain. it will allow amazon to drive oun the price on kindles and have a little more control.
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>> does this say phone to you? amazon phone? >> i could, but i think it maybe means more control of the supply chain. the interesting side to look at it is as a texas instruments shareholder. texas has told their partners they want out of the mobile chip business. they want to be more in the embedded chip space, devices and things other than the brutal competition they have been facing. they actually told people to leave them out of their road map. it's possible. i have no idea if amazon really wants to be in this business, but if they do, why wouldn't they take on texas's mobile chip unit. >> let's talk about pandora. falling on news that microsoft is entering the internet music streaming business with the xbox. joe, here is pandora getting clobbered by more than 3%. >> they have been falling for the last year. i have not liked pandora. let me tell you where i would be wrong. pandora needs to reverse two things. number one, it needs to capture a significant share of the auto market and it goes down to the
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internet fairness act. they need to reverse the significant costs of revenue that run somewhere around 31% right now for them. the industry average is 15%. until they get that legislation, pandora is fundamentally challenged. >> crude energy is -- crude oil is losing more energy today. it's now down significantly in the past month. should you buy on the dip or is there a better way to play that group? jeff has a play from the pits. welcome back. >> how are you? >> i'm good, thanks. what is the best play right now? >> well, look at this crude oil. $89, high volatility, high emotion wp we saw iran come out and say they are going to help with the nuclear talks. the market bought it, traded. bounced back up. touching $91. i think the best way is to play it in the uso. that's the etf. you can buy upside calls. i think the geow political text is going to outweigh the glow global growth forecast.
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>> the biggest variable to the direction of crude oil at this moment is geow political more than supply, demand? >> agreed. i think right now the turkey/syrian situation, if that escalates, that's not going to disrupt the supply of oil, but there is about 400,000 barrels going through that pipeline. if that heats up further, you will see it in iraq, a lot of countries coming in there. keep in mind, israel, they call those early elections. they will be some form of action. i am prepared to see oil go back up to $100. >> giver me a read on turkey and coal. >> just like -- they have decimated their opponents. coal has been decimated. look at some of the names. they've been down about 75%. i agree with gartman. we are focused on this debate because right now the administration, the obama administration, is not viewed
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friendly coal. they're not talking about relaxing any type of regulations to help new plants start up. >> decimated doesn't -- yes, the stocks have had a rough run but more recently the stocks have risen. i think that's the point i'm trying to get to, right? what do you want to do right now? forget what they did. >> absolutely. i think there's one thing, yeah, since october 3rd you're absolutely right. we have seen a bounce in all the coal stocks due to the fact that there may be a change in administration, but i think you have to be very mindful that there's going to be some tax loss selling pressure at the end of the year. a lot of people are long on these stocks. they have to check the books. there may be one more opportunity to buy before they go up again. >> jeff, got you. we'll talk to you again soon. >> all right, pal. >> stephanie link, what's the trade here? where do you go in energy? do go coal? >> we have been going natural gas actually because i do believe you have the seasonal trade buts also have the fact that supplies are coming down. they're still high, 8% above their five-year averages, but it
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has been coming down steadily since march. you have a 46% decline. southwest energy is one we like, one we were buying actually today. >> murph, what about you? >> anr, alpha natural. these guys broke -- i think we talked about it last week. it broke above its 100 day. you can use that as the stop loss. the stock is exploding today. was up 7%, 8% when i looked. >> still there. highs of the day. >> if you see romney come in and win the election, these coal names are all going to double from here i believe, but if that doesn't happen, they should still hold these levels because there is real value here. use the 100 day as your stop. >> speaking of the highs of the day, noticing right now that that's where u.s. stocks are. dow jones industrial average is up 80 points. there's the s&p 500, highs of the day, a gain of eight. one half of 1%. reversing last week's losses. you had the worst week for the stock market since june last week. so a bit of a reversal right
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there. still to come on "halftime" goldman makes a call on the cliff, one that's not shared by the majority of investors and we're certainly going to debate it. plus a bullish case for stocks even though it may require a bit more risk taking than usual. and later, we cross in the accountability zone as new numbers question the earnings power of high speed trading. we're back just after this. americans believe they should be in charge of their own future. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning.
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to help, sleep train is collecting donations for the extra activities that, for most kids, are a normal part of growing up. not everyone can be a foster parent... but anyone can help a foster child. we face not only the most avoidable economic crisis in history but the most predictable. i think we've got about a 30% chance to get this thing done before the cliff. i think we've got about a 30% chance to get it done immediately thereafter, and we got about a 30% to 35% chance -- >> senator -- >> that was deficit commission co-chair erskine bowles on halftime last week laying out the odds we will go over the fa fiscal cliff. 90% of investors expect congress to resolve the issue by year's end. goldman sees a 1 in 3 chance. are investors on the wrong side of the cliff? josh brown, are we too confident there's going to be a solution in erskine bowles was saying
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it's as if the stock market is praysi pricing in a fix to the cliff and that's not the case. >> they say pe multiple xletion is the likely outcome if we don't resolve this the closer we get to year end. what will that look like? will with he go from 14 1/2 to 13 1/2? i don't think that will have a huge effect on most investors. do you? >> don't you think the stock market could fall and fall hard? >> i would be much more worried about earnings than that. we're now at a 59% beat rate with admittedly small number of numbers reporting. they are most concerned about europe and china in their reasons for missing or not having great guidance. >> that's a longer term -- that's more forward -- that's a more forward view. the more pressing mat -- if there's no resolution, isn't the stock market going to get hit? >> scott? >> yeah. >> i think absolutely it will get hit, but if it does get -- if the people in washington are stupid enough to let this
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unfold, then you're going to see a "v" shaped drop and recovery in the market. i think more importantly a lot of people are pricing in the logical recovery or the logical resolution of the fiscal cliff because anything short of that is insane. it will hit the market short term. >> it's suicide for both parties is what most people would say back to the goldman strategists. they would say, of course, this is dangerous and this and that, but obviously both parties have a vested interest in brechtipro their spending for their constituents. >> and the way to play it right now? >> you stay long in your names because if we do resolve the fiscal cliff, you're going to see the market really take a move higher, take out the old highs and move a lot higher. with the vix, with volatility at the low levels it's currently at, stay in the core names you like but you can buy puts on the overall market. if you like, for instance, the financials, you can buy puts on the xlf, the basket of financials or puts on the overall, on the s&p, but have puts in the event this fiscal
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cliff thing blows up because if it does, 1,000 points, 1,500 points, it's going to hit the market hard. you need to have protection there and right now it's very inexpensive. >> get a look at the s&p 500 today. not much worry at all about the looming fiscal cliff, that's for certain. stocks at the highs of the day. s&p 500 pushing a gain of nine point and that's two-thirds of 1%. with the move today, the dow is less than 6% away from all-time highs and the fed is in easy money mode. is it time to add some risk? let's welcome larry cantor, the head of research at barclay's. welcome back to "halftime." >> thanks. >> it's time to get more risky? >> yeah. i mean, i think what you've seen investors do is slowly move out along the risk curve. you know what yields on treasuries look like. they're negative in real terms and people moved into investment grade corporate bonds. now we have seen record low nominal yields there. even in the stock market, the kind of stockses that have done
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well are things that look like bonds, high differ dent paying stocks and defensives. it's time to move out into the -- some of the cyclical names. i'm talking on a three to six month horizon here. >> right. >> you know, look, we've had a weak recovery. investors have been very risk averse and what have stocks done in the last 3 1/2 years? they have doubled. the question is, is that going to continue? the answer is probably, yes, it will, especially given the new round of monetary easing by the fed and thee cb. that's a very favorable environment for stocks. >> is there a disconnect inside your firm as to where you see the market going? you sound increasingly bullish whereas your firm, and presumably the top strategist there, has one of the lower price targets for the s&p year-to-date. he's more bearish than you? >> the equity strategists are a little more cautious. they're worried about what you were just talking about, the
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fiscal cliff, although they're getting increasingly attracted to -- they haven't pulled the trigger yet on the cyclicals. it's no the that we're expecting the economy to do a whole lot better. it's more in the absence of a negative. people getting very nervous about the u.s. numbers which are very weak, as you know, until about a month ago. now you have seen better than expected retail sales, a better than expected employment report, better than expected auto sales. choo china just had trade data that said the month before, which was very weak, was an outlier, and the export situation looks bet per. so it's just you're not going back into a recession. the fed announcement is extraordinary in its open-endedness. the fed is saying we're going to keep buying until the economy starts growing faster. that's pretty nice because the economy does start growing faster, that's good news. if it's not, the fed keeps pumping things up. >> stephanie link has something for you. >> i'm just curious.
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you like the psycyclical where numbers are probably at risk. think about it, maybe fourth quarter estimates, they've been coming down but they probably have to come down a little more, maybe even in 2013. how do you think stocks will react when we get earnings? will it be a relief rally for do we have one more leg down and that's when we jump in? >> the way i see it is the cyclicals have not really done well in the most recent stock market rally. i have been listening to your show the last hour. global growth is slowing. well, it has been, but the key is what's it going to do because the market is very efficient at pricing things. what we see here is more of a stabilization and maybe doing a little bit better in the next quarter or two and that will be good news. but it's also a valuation play in that it's the cyclicals that have not done well. some of them have gotten crushed, caterpillars and so forth. we see value there.
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>> larry, it's joe. just real quick. a lot of concern investors have is that the potential for capital gains to rise in 2013 means we get a sell-off before the end of 2012 on the anticipation of higher tax rates. is that going to happen? >> yeah, i think there are risks here. you were talking about the fiscal cliff. it's very hard to handicap this given we have a presidential election and then a lame duck congress. there's about $650 billion of fiscal cuts ready to take place, tax increases and spending cuts. we think it's going to amount to 200, a third of that. i think the market will live through it. one of your speakers made a good point, if it goes down, you know once that hit occurs you will get the bounce on the other side. there's good reason to look through that somewhat, but, yes, if you see those kind of capital gains tax hikes, you will get a hit to the market, no question. it's more a three to six month outlook. >> sound like you have some arm
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twisting with barry knapp. >> no, he's lacking more tactically. >> i know. good to have you. coming up, does the high speed profit machine need a tune up? what some new numbers suggest. if you're planning a trip to europe, why it may end up being cheaper than you think. more "halftime" is just ahead.
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coming up in the next hour on "power lunch," the dow is inching back towards it's all time highs set in 2007. are stocks though still cheap? sop people think they are. we're going to go hunting for value and tell you three stocks you need to own. microsoft unveiling a new music service. can it seriously take a bite out of apple? and the most powerful person working to get all sides inching towards a fiscal deal. you have never heard of her. now back to another fellow red skin fan, a happy one today, scott. >> absolutely. thanks so much. we'll see you at the top of the hour. is the high-speed trading profit machine slowing down? according to "the new york times," profits this year are expected to be down 35% from last year, and 74% below the 2009 peak. is this a sign that man is gaining an edge over the
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machine? murph, you have two different issues here, right? it's not as if high-speed trading is having less of an impact on the markets. it's just those particular firms may not be doing as well if you look at the trading volumes which have been down for a long time. there's a lack of volatility in the markets as well, and some other factors. two separate issues here. >> right. i think the key here on the high frequency trading issue is that a lot of people were saying for the longest time there was going to be -- you had to regulate it, tax it, do away with it. high frequency trading is here to stay. it's not going anywhere. so as someone who is running a long/short fund we have to figure out how to compete with the machines. right now i think what you're seeing is a lot of smaller guys getting their margins squeezed which makes the market start to swing back a little bit toward the regular person. i think that will continue. >> josh brown, you're shedding some tears over there i'm sure for the high-frequency community. >> well, i think there's a huge difference between electronic trading and high-frequency trading. electronic trading continues to
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support the market in real volume, real liquidity, htf continues to be a predator and i think as people start to educate themselves and realize, hey, some of this stuff is just not economic for anyone involved, i think there will be some legislation and i think the regulators are in a crash course right now working with current and former industry professionals from the hft world. it isn't going to be like this six months from now. >> joe, is it fair to raise the issue if high-frequency trading firms are being less successful because of a lack of volatility, it's they're creating their own volatile, if you will. they're making the markets more volatile so they can do better than they otherwise might? >> i think what they would be doing is targeting different asset classes or maybe something potentially that they had not traded in the past. look at the move we had in crude oil futures just a few weeks back. >> moving into currency now. >> they're going to go place that is historically they would not be to seek the prey.
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>> spain is a country famous for its beaches and full fights. may hold the key to stability of the euro. when will spain request a bailout and how should you play it? let's bring in mark chandler of brown brothers. mark, welcome back to "halftime." >> thanks, scott. >> do we have any indication whatsoever? can you give us your best guess as to when spain's going to raise its hand? >> i think it is not going to be this weekend at the summit. my best guess is spain's not going to request back-up assistance, not the full package like portugal, ireland and greece got but a smaller package, sort of conditional package, not probably until november. >> some of the best currency observers that we've spoken with lately, mark, certainly don't want any part of the euro/dollar trade. just been too difficult to figure out. the euro continues to hold some strength. it is at 129. it is basically in a very tight range, 1.29ish, 1.30ish. you're ready to make a move.
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why? >> the market has rallied more than a dime since the late july lows. the market is pricing in the spain package, they're moving away from the abyss. i think this is all priced into the market now and the next big news probably will be some disappoint. spain doesn't have ask for a package this week. greece may not get kicked out but there are still large hurdles for greece to go through. you see that breakdown between merger talks and airbus last week. >> what levels would you move yo euro/dollar? >> i think 1.29 on the downside and 1.30 on the upside. ideally say 1.30, stop above 1.31. looking for a move that will eventually bring us down to 1.26 before the end of the year. >> mark chandler, thanks. catch more currency trades on cnbc's "money in motion" every friday at 5:30 p.m. eastern time. up next, the biggest pops and drops in today's session.
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cnbc's seema mody trades your tweets. >> have no fear, the cnbc tweet patrol is here. that's coming up next on the halftime report where we trade your treats. stick around.
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welcome back. you've got questions, well, our traders have the answers. seema mody joins us with your
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tweets today. let's get right to it. tobacco giant altria is moving lower. is this strictly a yield play? you clearly don't go to the space for high growth. >> you don't go for growth. but this stock has gone from roughly $36 down to $32. the dividend's there the whole time. i think you get into the stock here, you get into the dividend but you could get a move back up to the $36 level. >> mike is looking at intel. he wants to know if he should add to his position. the stock down 6% over the past month. who should we go to for this one? stephanie? >> i actually think that intel has held up given all the bad news that's been out there. the company already lowered guidance negative 2% sequential growth which is way worse than seasonality. i'd know the bear case, that they are all pcs. but i do think they have different products coming out next year. i like the dividend yield so $20 is where i'd be buying it. let's do a couple of "pops &
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drops." merck. 4% pop. >> upgraded today by jeffries. i think this company is going to see growth improving, margins expanding. they're growing through acquisitions. i think this will be back in the mid 20s. >> lilly's having a good day. health care one of the best performing sectors today. >> these continue to be technically and fundamentally the best names. lilly is still 30% off its all-time high. but it has broken through the pre-lehman high. these names are just lined up for continued outperformance in my view. final trades when we come back from this break. ♪ into a high-tech masterpiece? whatever your business challenge, dell has the technology and services to help you solve it. oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here.
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stephanie link, your final trade. >> i like the i sha-share india. i think the market continues to go higher. >> blackstone, bx. you can get longer name here around $15. this part of the sifkle sets up really pose
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